RT Journal Article
T1 Gridlock and inefficient policy instruments
A1 Austen-Smith, David
A1 Dziuda, Wioletta
A1 Harstad, Bård
A1 Loeper, Antoine
AB Why do rational politicians choose inefficient policy instruments? Environmental regulation, for example, often takes the form of technology standards and quotas even when cost-effective Pigou taxes are available. To shed light on this puzzle, we present a stochastic game with multiple legislative veto players and show that inefficient policy instruments are politically easier to repeal than efficient instruments. Anticipating this, heterogeneous legislators agree more readily on an inefficient policy instrument. We describe when inefficient instruments are likely to be chosen, and predict that they are used more frequently in (moderately) polarized political environments and in volatile economic environments. We show conditions under which players strictly benefit from the availability of the inefficient instrument.
PB Econometric Society
SN 1933-6837
SN 1555-7561 (online)
YR 2019
FD 2019-11
LK https://hdl.handle.net/10016/30605
UL https://hdl.handle.net/10016/30605
LA eng
NO Harstad’s part of the research received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 Research and Innovation Program (Grant 683031). Antoine Loeper gratefully acknowledges the support of the Fundación Ramón Areces, of the Ministerio de Economía y Competitividad (Spain), grants RYC-2015-18326, ECO 2016-75992-P, and MDM 2014-0431, and of the Comunidad de Madrid, grant MadEco-CM (S2015/HUM-3444).
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RD 1 may. 2024